Holiday pay ruling places Lancashire firms at risk of legal action

Following a landmark legal ruling, Pierce is warning employers that they must be prepared for changes to holiday pay calculations, which must now reflect voluntary overtime worked during the rest of the year.

The warning follows an employment appeal tribunal which set a new legally binding precedent on holiday pay entitlement. Employees who earn overtime pay from voluntary duties when working should also receive those payments when they take holiday. If companies do not adhere to this, workers will have a case for an employment tribunal.

Pierce payroll administrator, Philip Johnson, said: “We are advising our clients that they must have the correct procedures in place to calculate holiday pay, and we are supporting them in implementing the necessary changes.

“This ruling has set an import legal criteria which all employers need to be aware of. Pierce is happy to advise any company that is not sure of their obligations towards employees.”

An employment tribunal appeal hearing by Dudley Metropolitan Borough Council ruled that payments for voluntary duties – including voluntary overtime, standby, call-out work and travel time linked to work – should be calculated into holiday pay.

The case involved 56 members of the Unite union and employed by Dudley MBC to work on the town’s housing stock. The workers did regular overtime, worked weekends and were on a standby rota, all on a voluntary basis.

In some cases, employees received around £6,000 a year for the voluntary duties in addition to their basic salary when working, but the overtime wasn’t included in their holiday pay. The underpayments for the 56 employees varied between £350 to £1,500 per year dependent on the amount of overtime accrued.

For more information about holiday pay, contact Philip Johnson on 01254 688110 or